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Thursday, February 25, 2016

How to: Work a Credit Card to Make Money

Disclaimer: This blog post is only for the ULTRA-DISCIPLINED. 

If you are currently trying to pay off your credit card debt this is probably not a good suggestion for you. If you don't think you can control your spending, again, this is probably not for you. And finally, if you haven't set a budget and know where every penny of your money is going this is probably not for you either.

BUT, if you don't have credit card debt and have been working well with your spending and keeping that within your pre-determined budget this may be a way for you to protect yourself from fraud and identity theft while making a little extra money. Here's how...

In case you have been living under a rock, using your debit card to make purchases is not what I would consider a "best practice." Every time you swipe that card you are putting your identity and hard earned money at risk. If stolen, your money is out of your pocket immediately and it could take months to get it back. If you aren't disciplined enough to use a credit card I would recommend looking in to Dave Ramsey's Envelope System and using cash.

By using a credit card you are able to protect yourself by spending someone else's money. If you see a fraudulent charge on your credit card all you have to do is report it and the credit card company takes care of the rest, no money out of your pocket. We use our credit card for every single purchase we make. 

This sounds crazy right? How do I keep up with my budget if it's all going to the credit card? Listen closely....we pay our credit card off DAILY. Every single day I log in to our credit card account and review our purchases. I then enter each transaction in to our budget expenses and then pay the balance off to zero. 

So how is this making me money? Incentives and cash back offers. When I first started working in public accounting I needed a credit card to book travel expenses on. I had never had a credit card before and frankly I had zero credit whatsoever. The only Company that would give me a credit card was Discover. At the time they offered 1% Cashback on every purchase, the kicker was you had to leave the balance on the card until the bill dropped or you wouldn't earn the Cashback. This scenario doesn't work for our budgeting system because it doesn't allow me to keep up with our expenses throughout the month. We rarely earned any Cashback because I just couldn't keep a balance on the card. 

A couple of months ago we decided to look in to switching card companies. We ended up settling on the Chase Freedom card. We earned incentives of $200 statement credit after spending $X and also 1 - 5% Cashback on purchases. We can pay our balance off daily and still get the rewards. It is important to note that we did cancel our Discover card. I don't like the idea of having more than one credit card per family. Over the last few months we have averaged about $50 in Cashback per month. That's a lot of money! 

If you are disciplined enough to stay within your budget and pay the balance off daily this is a great way to protect yourself from fraud and make a little extra cash. I most definitely do not recommend this for everyone. 

Debit Card Tips: I would like to stress that you should only run a debit card as credit, meaning you sign for it. Do not use a debit card to {pay at the pump} at gas stations, and never use a debit card for online shopping. Using these tactics will help you protect yourself from fraud if you prefer not to carry cash. 

Interested in seeing how we budget? 

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